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Downsides to the platinum coin, short and long term

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Riffing off letsgetitdone's rebuttal of Michael Sankowski's argument against it, there are a couple points I'd like to see addressed - either by letsgetitdone or someone else.

The first is the need (shared by the anti-PCS side) to speculate on how it would be received. This quote from letsgetitdone is a good representative:

Well, it's a new use of coinage, sure. That will make it “weird” for some people; not so weird for others. Using the coin forces the Fed to add reserves to the PEF which in turn gives the Treasury the ability to fill the pubic purse with most of the face value a platinum coin. I don't find that “weird.” I think it's the way things ought to be done. What purpose is served by using the term “weird” to describe PCS?

I think it's safe to say that not only is PCS new, it would be disruptive. Whether at $1 trillion or 60 or somewhere in between, the whole point is to have a big impact. None of us can know how it would be received. To take the position that, well, it's new, but people will adapt: that strikes me as blasé. It really could freak people out. It might not of course, but it might, and I don't think that's a trivial point. It would be nice to hear a frank acknowledgment that we're talking about uncharted territory, and that going there might have some real unintended consequences.

That's not necessarily a reason not to do it; it's just a weakness in the pro-PCS argument I think it's important to acknowledge.

The second point I'd like to see addressed is the inevitable use of this by political opponents. letsgetitdone postulates a reasoned and responsible use of PCS. What in his observations of our political leaders for the last decade (minimum!) has persuaded him that PCS would be used in a reasoned and responsible way? Or that appointed leaders like Bernanke would do so as well? PCS is a thing, not a value. It could be used for good or ill. I understand proponents have their hands full just trying to get the idea accepted by the political establishment and right now are banging their heads against a wall. But political cultures can change rapidly. If the time for PCS comes, it may not come in an orderly way - and if it does get accepted then Pandora's box will be open for good. There won't be any going back. It would be nice to see some reflection on how it could be used for other ends now; that may not be a luxury we have later.

The second is the weaker of the two arguments. Long term unemployment and austerity budgeting are much more urgent and need to be addressed immediately. The ways PCS could be misused at some future date is a real risk, but again not a reason to reject PCS.

I'd like to see proponents address both though. If nothing else, a forthright acknowledgment of the risks of our own arguments are a good way to establish their credibility.

Comments

On the first point, "wierd," I think the power of the coin as symbol is both what helped the idea spread, but also holds it back. I'm not sure I know how to reframe, but I think the key point that gets lost is that this fight is really about democratic control over the money creation process. What's weird is how we're doing it now. It's important to underline the idea at The Coin is already legal, which is what "platinum" does, but that paradoxically focuses the discussion on currency and not money (if I have my terms right); on the physical substance and not the social relation. Note that the MMR discussion accepts this; if a $25 billion coin is legal, then a trillion coin is! So the Washington consensus (incredibly) really did shift on this.

"Article I Section 8 money" is what we are really after, but that's a little awkward.

On the second point, the nature of the State has always been outside MMT's scope; and this may to some extent be faith-based -- a leap of faith that American democracy will rise to the occasion.

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi

None of us can know how it would be received. To take the position that, well, it's new, but people will adapt: that strikes me as blasé.

Actually, I think most people won't care. If something gives them the benefits of government without more taxes, I'm pretty sure they'll be happy with it. So, whether "people" will be blase about this might depend on who you mean by "people". If it's the inside the beltway crowd, nevermind.

Acknowledging that there might be unintended consequences might be nice, but the problem if they're not foreseeable, then such acknowledgement strikes me as trivial.

On the other hand...

What in his observations of our political leaders for the last decade (minimum!) has persuaded him that PCS would be used in a reasoned and responsible way?

This strikes me as a good point. I've made it once or twice in comments, and have yet to see an answer that really answers it. Maybe there isn't one.

You can't work in the defense industry as long as I did without wondering what potentially unlimited funding would do to the idea of responsible government spending. Over the years, we've spent an incredible amount of money for defense, and yet have surprisingly little to show for it. Look at what the Russians and Chinese do with much smaller budgets, and I think you'll get the idea.

Saying Congress controls the purse strings doesn't satisfy me very much on this score, because Congress has shown that it's only worried about spending that affects someone else, not the folks in their constituencies.

I agree that PCS might well be misused. But PCS is no different in this respect from direct Treasury issuance of fiat money to repay debt or Congressional Appropriations. Right now, we have indirect issuance of fiat using an accounting procedure that labels the financing procedure the national debt. That is a terrible political problem for progressivism, and had been crippling progressive economic policy for as long as I can remember going back To Harry Truman. There has been no bigger factor in producing the inequality we have now, since the "national debt" meme feeds into and supports neo-liberalism.

The consequences of that meme have been terrible for us all. The risk we take with PCS cannot be any worse than the reality we are experiencing now in my view.

On the question of whether people will adapt to the use of PCS; I really have to say that I think the view that people not involved in the FIRE sector will become hysterical over the move is very far-fetched assuming that the President presents it as a way of paying off the national debt and removing the need for austerity. He has the bully pulpit and he can tell people all the good things can be done with the $60 T including ending the problems with SS and other entitlements, extending these programs, creating full employment and Medicare for All, not raising taxes or borrowing anymore, etc. He can sell it with the first speech and he can reinforce the sale every week he pays down more of the debt.

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